Question 1. Libertyville has two optometrists, Dr. Smith (S) and Dr. Jones (S). Each optometrist can choose to advertise his service or not. The net revenue to each optometrist, in thousands of dollars, is listed on the payoff matrix below. Answer questions a through c:

a. Does Dr. Smith have a dominant strategy?
b. Does Dr. Jones have a dominant strategy?
c. Does a Nash equilibrium exist for this game?

Question 2. Suppose the market for cigarettes is characterized by the following information:

Q_d = 70 - 5P [Demand] Q_s = 3P - 10 [Supply]

Suppose the government imposes a sales tax of $2 per unit. Answer questions (i) through (v) below:

i) Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium.
ii) Calculate the tax revenue in the post-tax equilibrium.
iii) Calculate the change in consumer surplus due to the sales tax.
iv) Calculate the change in producer surplus due to the sales tax.
v) Calculate the Dead-Weight-Loss due to the sales tax.